Greece's much-revised 2009 budget deficit will be set "once and for all" by Eurostat at above 15 percent of GDP, the country's finance minister said on Wednesday.
Greece's 2011 draft budget earlier this month estimated the 2009 deficit at 13.8 percent of gross domestic product, but the EU's statistics office Eurostat is expected to revise the deficit upwards in data to be published in mid-November.
A first revision of the 2009 deficit to 12.5 percent of GDP last year after the Socialists came to power triggered the country's worst fiscal crisis in decades and sent shockwaves throughout markets worldwide.
"Remember the 2009 budget was projecting a deficit under 3 percent, then a few days before the (Oct. 4) election the reported deficit to the EU Commission was 6 percent," George Papaconstantinou told a conference in Cyprus.
"We realised it was over 12 percent. And actually, even after the final revision by Eurostat … which will validate Greek numbers for 2009 once and for all, it will be above 15 percent. We are talking about a five-fold difference."
The cost of insuring Greek debt against default rose on Wednesday as risk aversion to the sovereign continued to grow after a series of negative comments, while bonds sharply underperformed German debt.
Five-year credit default swaps (CDS) on Greek government debt rose to 720 basis points, up 39 bps according to data monitor Markit. This means it costs 720,000 euros to protect 10 million euros of exposure to Greek bonds. [ID:nLDE69Q14D
The ruling Socialists plan to slash the budget deficit to 7.8 percent of GDP this year and cut it further to 7.0 percent in 2011.[ID:nLDE693195]
"On the fiscal front nothing is won yet," Papaconstantinou said, while adding: "We are on track and will continue to be on track."
Papaconstantinou told the same economic conference that the country's economy would contract by between 2.5 and 3 percent next year.
In the 2011 draft budget, published earlier this month, the government estimated that GDP would shrink by 2.6 percent next year from a 4 percent contraction in 2010, as an austerity drive takes its toll.
The Mediterranean country's economy has been hit by tough budget cuts prescribed by a 110 billion euro ($153.5 billion) EU/IMF bailout deal agreed to pull the country out of its debt crisis.
"Growth will contract by 4 percent this year, and next year by between 2.5 and 3 percent," Papaconstantinou said. (
